Effective financial management is crucial for property managers to maintain financial accuracy and transparency. However, without clear delineation of billing responsibilities, managing transactions and bookings financials can be challenging, leading to errors and discrepancies. Recognizing this challenge, Clearing has introduced a powerful solution: the Trust Accounting or simply Accounting Field. This feature allows property managers to define billing responsibility for each amount, ensuring accurate statement generation for property owners and management companies.
Clearing's Trust Accounting Field revolutionizes financial management by providing users with the tools they need to define billing responsibilities accurately. With this feature, property managers can effortlessly allocate revenue and expenses to property owners, management companies and tax entities, ensuring that each party is billed correctly. By streamlining the billing process and enhancing financial transparency, Clearing enables property managers to optimize their operations and minimize errors.
How To Use The Accounting Field
The Accounting field can be used for both trust accounting and co-host models.
A. For Trust Accounting
In the case of trust accounting, you are collecting funds on behalf of your owners and then paying them. The Accounting field will help you track the amounts to move out of the trust account to:
Pay owners (option "to owner")
Pay your management company (option "to management")
Pay taxes ("to tax")(when you are remitting taxes on behalf of your owner)
So, we recommend leaving this field empty for any transactions that isn't to/from your trust account.
When paying expenses out of your own credit card (or out out of your operating account) and for which you want to be reimbursed, you need to mark those as "to owner" to deduct them from the owner's payout AND you have to use the "Reimbursable?" option as checked to make sure that the amount is reflected as a reimbursable expense in your management statement.
B. For Co-Hosting
When co-hosting, you can still use the accounting field to account for the net revenue that the owner is making and track the amount to collect from the owner.
To track reimbursable expenses on your management statement, follow the same steps as for trust accounting: mark those expenses as "to owner" to deduct them from the owner's payout AND use the "Reimbursable?" option as checked to make sure that the amount is reflected as a reimbursable expense in your management statement. This will be added to the total amount to collect from your owner.
If you already receive commission (or cleaning fees) from Airbnb to your bank account as a co-host, you can mark those transactions as "to management" and use the "Deductible?" checkbox as checked to deduct this transaction from the total amount to collect from the owner. In other words, we are subtracting any amount that you already collected to make sure that you invoice your owners the net amount.
For example: let's assume that you expect to collect $200 of cleaning fees, $100 of management commission and $50 of reimbursable expenses. The total amount in your management statement would be $350. This is the total amount to collect from the owner. Now let's assume that you have setup Airbnb to pay you the cleaning fee directly to your bank account (not the owner). Then we need to find this transaction in your list of bank transactions and mark it "to management" and "deductible" to deduct it from the total. So the net management amount would be $350 - $200 = $150.
Description Of The Accounting Field
The accounting field takes 4 options. Note that Rules By Type on bookings will help you automate the accounting field allocation on your booking financials.
To owner
To management
To tax
Exclude
-> To owner
If it is positive it will be revenue for the owner, if it is negative it will be deducted from their payout. Anything marked to owner will be reflected on the owner statements. Note that the owner and category also have to be associated with the transaction or booking financials to be on the owner statement.
IMPORTANT NOTE 1: because both the transactions and booking financials (found when opening a booking) can be accounted, you want to make sure to avoid double counting revenue. Anything booking related, should be accounted using the booking data. In other words, any payouts from channels in your transactions data should not be accounted using the accounting field. You can leave it empty.
IMPORTANT NOTE 2: As a result of the above comment, the only transactions that you want to mark "to owner" are expenses that should be deducted from the owner's payout. The revenue side will already be accounted using the booking financials.
-> To management
If it is positive it will be revenue for the management company, if it is negative it will be deducted from the management's payout. Anything marked to management will be reflected on the management statements. Note that the owner and category also have to be associated with the transaction or booking financials to be on the management statement.
Typically, Cleaning fees are collected by the property manager to pay cleaners. In this case, the cleaning fee collected in the booking financials should be set "to management". As a result, they will be displayed on the management statement and not on the owner statements as this isn't revenue for them.
-> To tax
This is relevant if you collect and remit taxes on behalf of your owners. In this case, you can mark the tax items under each booking "to tax". Then use the specific tax reporting to track all financials marked "to tax".
-> Exclude
You want to mark Exclude any financials that are not collected in your bank account. This is relevant when certain Property Management System track taxes while the channel remits them. You would still see those numbers in your booking financials in Clearing, but because they are already paid by the channel, they aren't going to the owner or manager or tax. In this case we mark them as Exclude to make sure that they aren't included in any statements.
Simple Steps to Use the Accounting Field
Please note that you can find the accounting field on both the transaction data and the booking data. On each transaction you will find the accounting field dropdown. Similarly, on each financial item of a booking, you will find the accounting field.
We will review how to use the accounting field separately on the booking financials and on the transaction data.
1. On Bookings Financials
Booking financials are split by type of fees, for example gross accommodation fare, cleaning fee, discount, taxes, etc. For each fee, you can setup a different accounting option to decide if the amount is either going to the owner, the management, tax or simply exclude. Please refer to the description above for a detailed explanation of each option.
NOTE: All booking financials should be accounted and the accounting field should not be empty.
Using the Rules By Type, you can quickly allocate an entire category to the right accounting option.
Note that inside each booking, you will have a summary of the financials marked to owner, to management and to tax.
2. On Transactions
The only time you want to use the accounting option on Transactions is for the following:
To add an expense on the owner statement and deduct their payout, make sure sure to mark the transaction "to owner". Also, categorize the transaction and assign an owner. There shouldn't be any other scenario where you need to mark an entire transaction "to owner". The booking revenue is already accounted using the booking financials. See details above.
To add an expense on the management statement, you can mark it "to management". This is only relevant when the transaction wasn't paid out of the trust account.
For Co-host: To deduct an amount on the management statement (for example you already collected the cleaning fee from Airbnb), mark it "to management" and check the box "deductible?" as yes.
Do not mark any payout from channels "to owner". Revenue related to bookings are accounted in the booking data.
Review and Confirm
Double-check your selection to ensure accuracy. Review the financial details and confirm the billing responsibility assignment. Remember that you can and should automate this by creating rules using the “by Merchant” and “by Type”, or through the custom rules on transactions or bookings. See the relevant knowledge article on rule creation to learn how this can be set up in Clearing.
Gain the power to precisely allocate transactions between property owners and management companies, ensuring accurate billing and transparent financial reporting utilizing Clearing's Trust Accounting Field. Streamline your billing processes, minimize errors, and optimize your financial management workflows.
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Clearing is a Financial Technology Company, not a bank. Deposit Accounts are issued by Evolve Bank & Trust, Member FDIC.